The Difference of Utilization of Financial and Performance Report in the Budget Allocation decision: An Experiment of Indonesia’s Local Government

  • Fajar Gustiawaty Dewi

Abstract

In this eraof New Public Management, local governments arerequired to design performance and financial reports. According to the decision usefulness theory, financial reports and performance reportscanideally be used in decision making on budget allocations. However, the current trend denotes that performance measures are not used for decision making, budget allocation or program monitoring. On this basis, it isargued that better financial reports would increase the credibility and integrity of public finances and contribute to better management of public resources. This study was conducted using an experimental design between subject factorial design 2x2 to provide empirical evidence fordecisions taken by the budget team. The subjects were inputted into 4 cells using different treatments.The results of this study show that there wereno differences in the decision onbudget allocation by subjects who wereinformed of the budget realization reports  and financial performance reports (Cell 1), the subjects given the budget realization reports and non-financial performance reports (Cell 2),the subjects which  weregiven the operational report  and financial performance report (Cell 3), and the subjects which were given the realization operational report and non-financial performance report (Cell 4). These results indicate that the financial reports and performance reports did not have aninfluence on budget allocation decisions. Furthermore, itimplies that the local government budget team needs to be continuously socialized about the importance of this information in order toenable the implementation of budgetary decisions that are efficient and effective.

 Keywords: Budget allocation, experiment, financial report, performance report

Published
2020-06-06
How to Cite
Fajar Gustiawaty Dewi. (2020). The Difference of Utilization of Financial and Performance Report in the Budget Allocation decision: An Experiment of Indonesia’s Local Government. International Journal of Advanced Science and Technology, 29(04), 5235 - 5247. Retrieved from http://sersc.org/journals/index.php/IJAST/article/view/25950